Investment treaty practice

Model BIT

Does the state have a model BIT?

MOFCOM has not released any official model BIT text, but issued a draft Model Agreement on the Reciprocal Promotion and Protection of Investments in 2010, most of which was adopted by the 2011 BIT between China and Uzbekistan.

We have not seen China insisting on a model text in negotiation of BITs, although there have been similarities in the concluded instruments with which China is a party.

Preparatory materials

Does the state have a central repository of treaty preparatory materials? Are such materials publicly available?

The MFPRC is generally in charge of foreign affairs, whereas MOFCOM negotiates and manages economic treaties and agreements, bilateral or multilateral. MOFCOM publishes information across several websites maintained by several departments, such as:

  • the China FTA Network, which updates progress in FTA negotiations and provides online accessible agreements (in Chinese and English alike) (http://fta.mofcom.gov.cn);
  • a list of BITs, showing the BITs concluded from 1982 to 2016 (http://tfs.mofcom.gov.cn/article/Nocategory/201111/20111107819474.shtml);
  • International Trade and Economic Treaties and Practices, which provides an incomplete list of international trade and economic treaties and practices to which China is signatory (http://tfs.mofcom.gov.cn/article/date/j/); and
  • an update of international treaties and agreements, which provides details of treaties and agreements China has occasionally signed (www.fmprc.gov.cn/mfa_chn/ziliao_611306/tytj_611312/tyfg_611314/).
Scope and coverage

What is the typical scope of coverage of investment treaties?

Most BITs entered into by China have a similar scope of coverage. For example, as prescribed in the Agreement of Investment of the Framework Agreement on Comprehensive Economic Cooperation between China and ASEAN, ‘investor’ means a natural person (any natural person possessing the nationality or citizenship of, or right of permanent residence in the party in accordance with its laws and regulations) of a party or a juridical person (any legal entity duly constituted or otherwise organised under the applicable law of a party, whether for profit or otherwise, and whether privately owned or government owned, and engaged in substantive business operations in the territory of that party, including any corporation, trust, partnership, joint venture, sole proprietorship or association) of a party that is making or has made an investment in the territories of the other parties. Further, ‘investment’ refers to every kind of asset invested by the investors of a party in accordance with the relevant laws, regulations and policies of another party in the territory of the latter including, but not limited to, the following:

  • movable and immovable property and any other property rights such as mortgages, liens or pledges;
  • shares, stocks and debentures of juridical persons or interests in the property of such juridical persons;
  • intellectual property rights, including rights with respect to copyrights, patents and utility models, industrial designs, trademarks and service marks, geographical indications, layout designs of integrated circuits, trade names, trade secrets, technical processes, know-how and goodwill;
  • business concessions conferred by law, or under contract, including concessions to search for, cultivate, extract, or exploit natural resources; and
  • claims to money or to any performance having financial value.

Similarly, in the FTA between China and New Zealand, a ‘qualified investor’ refers to a natural person (a national or a permanent resident of a party under its laws) or enterprise of a party (an enterprise constituted or organised under the law of a party and a subsidiary located in the territory of a party and engaged in substantive business operations there) who seeks to make, is making, or has made an investment in the territory of the other party. ‘Investment’ means every kind of asset invested, directly or indirectly, by the investors of a party in the territory of the other party including, but not limited to:

  • moveable and immoveable property and other property rights such as mortgages and pledges;
  • shares, debentures, stock and any other kind of participation in companies;
  • claims to money or to any other contractual performance having an economic value associated with an investment;
  • intellectual property rights, in particular, copyrights, patents and industrial designs, trademarks, trade names, technical processes, trade and business secrets, know-how and goodwill;
  • concessions conferred by law or under contract permitted by law, including concessions to search for, cultivate, extract or exploit natural resources;
  • bonds, including government issued bonds, debentures, loans and other forms of debts, and rights derived therefrom; and
  • any right conferred by law or under contract and any licences and permits pursuant to law.

However, under the FTA, the term ‘investments’ also includes investments of legal persons of a third country, which are owned or controlled by investors of one party and which have been made in the territory of the other party, and the relevant provisions of the agreement apply to such investments only when such third country has no right or abandons the right to claim compensation after the investments have been expropriated by the other party.

Protections

What substantive protections are typically available?

China’s BITs offer general protection for respective foreign investors. However, the scope of protection varies given the differences of the counterparty and the date of conclusion. Almost all China’s BITs cover national treatment, most favoured nation, free transfer, fair and equitable treatment and protection on expropriation and nationalisation (normally, indirect expropriation is also included). However, China’s earlier BITs usually do not cover full protection and security, and the umbrella clause. With the development of investment treaty practice and the need to improve investment conditions, China has tended to accept more internationalised versions of BITs, granting more comfort and protection to foreign investors.

Dispute resolution

What are the most commonly used dispute resolution options for investment disputes between foreign investors and your state?

To date, there have been only two investment treaty claims against China that are publicly available, one concluded without award and the other yet to be publicly disclosed. Normally, when negotiations are unsuccessful, investors can usually choose to submit the dispute to the ICSID or UNCITRAL or establish an ad-hoc arbitral panel according to the treaty that the specific claim is based on.

Confidentiality

Does the state have an established practice of requiring confidentiality in investment arbitration?

Because there have been no published investment awards, it is hard to draw a conclusion on confidentiality requirements by the Chinese government.

Insurance

Does the state have an investment insurance agency or programme?

China does not provide an investment insurance programme, but it established a state-owned company, China Export and Credit Insurance Corporation, to handle the insurance business arising from overseas investment. Introduction of overseas investment insurance from China Export and Credit Insurance Corporation can be found at: http://www.sinosure.com.cn/en/Insurance/oii/index.shtml. As stated in the introduction of the overseas investment insurance application conditions, the insurance referred to is not necessarily contingent on the existence of an investment treaty between China and the host state.

Additionally, China is a member of Convention Establishing the Multilateral Investment Guarantee Agency (MIGA). On condition that the investment was targeted to one of the MIGA members, the Chinese investor may apply for MIGA insurance for the overseas investment.